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on Central and Western Asia |
| By: | Jalali Naini, Ahmad Reza; Naderian, Mohammad Amin |
| Abstract: | Impulse for business cycles in Iran are largely generated from oil price (terms of trade) shocks and propagated through fiscal policies. The classic mission of monetary policy is to conduct countercyclical policy, however, this is not a universal norm. Pro-cyclical fiscal and monetary policies during boom periods has been observed in a number of developing countries. Such policies tend to amplify the impact of positive oil price (terms of trade) shocks through aggregated demand expansion. The consequence has been strengthening of domestic inflationary pressures and appreciation of the real exchange rate. This paper attempts to examine if monetary policy in Iran is countercyclical and what is the impact of fiscal policy in this regard. It will be argued that the stance of fiscal policy and how government expenditures are financed can have a significant effect on how monetary policy is conducted. Our empirical observations regarding the experience of the Iranian economy indicates that, in a fiscally dominated structure, fiscal and monetary policies are generally expansionary, particularly during economic booms. This entails subsequent very large managed depreciation of the exchange rate, higher inflation rates, and an economic downturn. Under fiscal dominance monetary policy will be ineffective and both targets and instruments of monetary policy making will not be under the control of monetary authority. The policy package of a structural balanced fiscal rule combined with smoothing of quasi-fiscal operations is the appropriate policy measure that enhances the ability of central bank to conduct more effective countercyclical monetary policies. |
| Keywords: | Pro-cyclicality, Fiscal Dominance, Monetary policy, Ricardian |
| JEL: | E5 |
| Date: | 2017–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:84480&r=cwa |
| By: | Özgören, Ayşe Abbasoğlu (Hacettepe University); Ergöçmen, Banu (Hacettepe University); Tansel, Aysit (Middle East Technical University) |
| Abstract: | The relationship between fertility and employment among women is a challenging topic that requires further exploration, especially for developing countries where the micro and macro evidence fails to paint a clear picture. This study analyzes the two-way relationship between women's employment and fertility in Turkey using a hazard approach with piece-wise constant exponential modelling, using data from the 2008 Turkey Demographic and Health Survey. To the best of the authors' knowledge, this is the first study that makes use of an event history analysis to analyze this relationship within a developing country context. Specifically, a separate analysis is made of the association between the employment statuses of women in their first, second, third, and fourth and higher order conceptions, and the association of fertility and its various dimensions with entry and exit from employment. The findings suggest that a two-way negative association exists between fertility and employment among women in Turkey, with increasing intensities identified among some groups of women. Our findings also cast light on how contextual changes related to the incompatibility of the roles of worker and mother have transformed the fertility-employment relationship in Turkey, in line with propositions of the role incompatibility hypothesis. |
| Keywords: | fertility, employment, women, event history analysis, Turkey |
| JEL: | C41 J13 J16 |
| Date: | 2017–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11238&r=cwa |
| By: | Jalali Naini, Ahmad Reza; Naderian, Mohammad Amin |
| Abstract: | This paper develops a new Keynesian DSGE model compatible with the structural characteristics of commodity exporting developing economies (financial vulnerability, relatively high pass-through rates, procyclical fiscal policy, and high terms of trade volatility) to compare the performance of alternative policy regimes, namely flexible domestic inflation targeting, flexible consumer price index inflation targeting, and the real exchange rate targeting. Evaluation of the above alternative policy regimes and relative stability of key macroeconomic variables are conducted through an optimal Ramsey policy method. The policy evaluation results based both on stabilization and welfare measures obtained for the case of Iran imply that for the developing commodity (oil) exporting economies stabilization with a broader inflation targeting framework in which the real exchange rate is also targeted is the superior policy regime. Optimality of the alternative policy regimes and their rank are sensitive to the degree of financial vulnerability. Financial vulnerability in this model explains why departure from floating exchange rate in an inflation targeting framework is the appropriate policy and not merely a “fear”. As the degree of financial development increases sufficiently, the standard flexible inflation targeting becomes the superior policy regime. A policy rule to weaken procyclicality of fiscal policy further enhances the welfare performance of this regime. |
| Keywords: | Financial vulnerability; inflation targeting; fear of floating; Ramsey method. |
| JEL: | E52 |
| Date: | 2017–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:84481&r=cwa |